Executive Summary
Incorporating a company in Indonesia, there are two major concerns: 1. who (formally) owns the company? 2. Who controls the company? These will determine the way we strategically incorporate a company in Indonesia. Especially, foreigners are limited by Indonesia Negative Investment List. You might want to be minority “controlling” shareholder using a nominee arrangement structure.
Foreign Company Incorporation in Indonesia
As foreigner, you will need to identify and determine the business activities which must be by the Indonesia Standard Business Classification (KBLI). Also, the minimum capital required is IDR 10,000,000,000. – (ten billion rupiah), unless otherwise stipulated by applicable regulations.
Formally, you will need to determine who will be the shareholders, directors, and commissioners, and submit their identity (passport), and tax identification number (NPWP) for Indonesian shareholders. The Notary (or Lawyer) will draft a Deed of Company Incorporation to be signed by the Shareholders (or their proxy). Once the documents meet the requirement, the Government will issue business license number (NIB), and later, the specific operational licenses based on the business activities chosen. However, you can start the activity once the company obtained business license number (NIB).
For company incorporation in Indonesia, especially if you want to control the company, it’s best if you consult Indonesian Lawyer and strategically design clauses also terms and conditions of such incorporation.
Joint Venture with Indonesian Partner
You may have Indonesian partner and want to establish a Joint Venture (JV) Company. The questions you need to consider are: who (formally) owns the company? Who controls the company? The answers will determine the structure and the drafting of the JV Agreement. Also, role and limitation (boundaries) are the 2 other important things you need to specifically design to mitigate unnecessary disputes with the local partner. The more detail the clauses the more you anticipate. (Note: this has to be structured and designed by experienced Lawyer).
Finance and operation are also other things to be discussed and determined in a JV structure. Normally, the majority shareholder (or the beneficial owner) will determine the finance director, while the local partner will be responsible for most operational, license, and government, as well as public relations in Indonesia. If you’re foreigner wanting to control the company, you might consider discussing with Indonesian Lawyer to structure this JV company incorporation, and agreements, also other matters related to the JV arrangement.
Please also note that Indonesia does not recognize nominee agreements. It is prohibited to use nominee agreements by law in Indonesia (in Indonesia, the nominee shareholder will be acknowledged as the owner of the shares). However, you can request a lawyer to design a ‘nominee’ structure to protect you as the beneficiary of the shares.
Article written by
Stephan Hutagaol, SH., MKn., MSi., CLA.
(Managing Partner of Christyanto, Hutagaol & Partners)
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